According to the Biz2Credit Small Business Lending Index, major banks deny 79% of small business loans. Yes, the field of competition for these loans is great. After all, 40% of employees wish to start their own business at some point.
The goal of this guide is to help a person improve their odds of getting approved for a small business loan. This post uses statistical and empirical data to determine what it takes to be part of the elite who actually get approved. Once you know exactly what the banks are looking for in a candidate, you can make an informed pitch.
There's an old saying, "The way to get a loan is to prove you don't need one." It's true. It's a bit of a catch-22, much like getting a credit card. Going after bank business loans takes confidence. An ideal loan candidate, who is already a business owner, should have a cash flow healthy enough to cover the potential loan payments. If the loan is for a new business, the hopeful borrower should have a track record of success in other enterprises.
No matter what the situation, it helps to have a healthy amount of collateral. Bank business loans are meant to generate income for the bank. Banks lower their default rate by lowering risk. The stronger the candidate, the better chance the bank has of making money on the loans. Banks look for someone worth their investment. This means knowledge, experience, and collateral.
How to Obtain Small Business Startup Loans
According to Inc., small business startup loans are nearly impossible to obtain. That's quite discouraging. According to Bloomberg, startups shouldn't even bother with getting loans from banks. That's even more discouraging. However, there are ways to get startup loans.
Once a person gets a loan, they must contend with the small business loan rates, which vary greatly, depending on the institution. The Small Business Administration (SBA) offers appealing rates for those seeking bank business loans. The more a person borrows, the less interest they pay. Expect a startup to pay towards the higher end of the spectrum. View this table to see what the current rates are for SBA loans. These rates average the note rate, all servicing fees, and amortization over the life of the loan.
Small business startup loans are available, but it takes diligence. If money is needed in a hurry, seek out alternative financing options such as crowdfunding or striking an agreement with friends and family. Running a business is often about thinking creatively.
What to Do Once a Small Business Loan Is Secured
With all this information about bank business loans and small business loan rates, one must wonder what happens after a loan is obtained. If a loan offer is presented, it's important to agree only to terms which are suitable. Some people jump at a loan just because they are offered one. It's important to read over the terms and make sure it's the right choice.
Feel free to browse our reviews of small business loans. The page will give an idea of what is out there. After all, you've just finished reading about how to get bank business loans. It's now time to put this information to use. Good luck. And remember, it is possible to get a small business loan! Let us know how it goes!